Sofco Erectors, Inc. v. Trs. of Ohio Operating Eng'rs Pension Fund
| Decision Date | 19 May 2020 |
| Docket Number | Case No. 2:19-cv-2238 |
| Parties | SOFCO ERECTORS, INC., Plaintiff, v. TRUSTEES OF THE OHIO OPERATING ENGINEERS PENSION FUND AND THE OHIO OPERATING ENGINEERS PENSION FUND, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
OPINION AND ORDER
This matter is before the Court on Defendants' Motion to Enforce Arbitration Award (Doc. 15) and Plaintiff's Motion for Summary Judgment (Doc. 17). These motions are fully briefed and ripe for disposition. For the following reasons, Plaintiff's Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART. And Defendants' Motion to Enforce the Arbitration Award is GRANTED IN PART AND DENIED IN PART.
This action involves withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. § 1381 et seq., which amended the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"). Plaintiff Sofco is a construction industry employer under ERISA. 29 U.S.C. § 1383(b). Construction industry employers' withdrawal liability is treated differently than that of non-construction industry employers. A construction industry employer does not incur withdrawal liability upon the termination of its obligation to contribute unless it: (a) continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required; or (b) resumes such work within five years of the date upon which its obligation to contribute ended. 29 U.S.C. § 1383(b). The statute also contains a separate provision for construction industry employers relating to partial withdrawal liability. Partial withdrawal liability is assessable to a construction industry employer only when work continued for an "insubstantial portion" of the employer's work in the jurisdiction of the collective bargaining agreement. 29 U.S.C. §1388(d)(1). In other words, a construction employer can only be assessed partial withdrawal liability when it contributes to a benefit fund only an "insubstantial portion" of what it contributed to that fund in prior years.
After an employer withdraws, the plan sponsor calculates the amount of any withdrawal liability. 29 U.S.C. §§ 1382, 1391. In calculating the withdrawal liability, the statute requires the plan sponsor to use actuarial assumptions and methods that, "are reasonable (taking into account the experience of the plan and reasonable expectations)[.]" 29 U.S.C. §1393(a)(1). Once the plan sponsor calculates and assesses any withdrawal liability, the employer may then request review of it. 29 U.S.C. § 1399(b)(2). If the request for review is unsuccessful, the employer may initiate an arbitration proceeding to resolve the dispute. 29 U.S.C. § 1401(a)(1). Under 29 U.S.C. § 1401(b)(2), the arbitral decision is subject to review by the district court. Sofco brings this case under 29 U.S.C. § 1401(b)(2) to vacate entirely or modify the Arbitrator's award.
Sofco began operations on April 1, 2004, when it purchased its predecessor's (also calledSofco Erectors, Inc. ("Old Sofco")) assets.1 (Doc. 11-2, Hesford Aff. ¶ 2, PAGEID# 83). John Hesford ("Hesford"), Dan Powell ("Powell"), Dave Schmitt ("Schmitt") and Jim Ludwig ("Ludwig") owned Sofco when it formed. (Id. ¶ 4, PAGEID# 83). Hesford, Powell, and Ludwig all worked at Old Sofco, but none held any ownership interest in it. (Id. ¶ 5, PAGEID# 84). None of Sofco's ownership held any ownership interest in Old Sofco. (Id.; Doc. 11-2, Gates Nov. 6, 2018 Aff. ¶ 2, PAGEID# 118). The Asset Purchase Agreement did not include an assumption of Old Sofco's obligations to the Fund, or its contribution history. . No bond was posted, and Old Sofco did not agree to secondary liability to the Fund. (Id. ¶ 3, PAGEID# 83). Sofco was a new legal entity when it was formed at arms-length from Old Sofco even though it maintained the same name.
Sofco's business involves erecting steel and precast primarily for commercial buildings and hospitals. (Id. ¶ 6, PAGEID# 84). Members of the International Association of Bridge, Structural, Ornamental, and Reinforcing Ironworkers (the "Ironworkers") perform this work. (Id.). Sofco operates in three primary locations within Ohio: greater Cincinnati, greater Columbus, and greater Dayton. (Id. ¶ 7, PAGEID# 84). Hesford is the CEO and runs the Cincinnati and Dayton operations and Powell is the COO and runs the Columbus operation. (Id. ¶ 7, PAGEID# 84; Doc. 11-7, Powell Dep. at 10-11, PAGEID# 1628).
Since 2004, Sofco has been a signatory to collective bargaining agreements with three different Ironworkers locals that cover the Cincinnati, Dayton, and Columbus areas. (Doc. 11-2, Hesford Aff. ¶ 8, PAGEID# 84). Sofco was also a signatory to a series of collective bargaining agreements with Local 18, the last of which was effective from May 8, 2013 to April 30, 2017.(Id. ¶ 9, PAGEID# 84). In accordance with the Local 18 bargaining agreement, Sofco made contributions to the Fund for its employees who were Local 18 members.
Sofco was originally a signatory to the Local 18 CBA because it employed Local 18 members to operate cranes both owned by Sofco and rented. (Id. ¶ 10, PAGEID# 84). Sofco contributed to the Fund for thousands of hours of crane operator work both directly and indirectly (when it used contractors that employed only Local 18 members to operate cranes). (Id.). In the mid to late 2000s, the crane contractors began to stop renting cranes "bare" (unoperated). (Id. ¶ 11, PAGEID# 84). They required their cranes be run by their employees who were Local 18 members. (Id.). By 2015, all rented cranes were operated by the crane contractors. (Id.). Sofco continued to operate its own cranes until 2016. (Id.). Local 18 members (on Sofco's payroll) operated the cranes before this change, and Local 18 members (on the crane companies' payroll) operated the cranes after the change. (Doc. 11-3, Byers Dep. at 18-19, PAGEID# 172). Accordingly, the Fund suffered no material change in contribution levels as the result of Sofco subcontracting the crane work; the Fund received the same contributions for the same hours from a different company.
Sofco also employs individuals to perform shop work. Shop duties are performed on or out of Sofco's facilities, and include cleaning, organizing, making deliveries, or any other duties management assigns. (Doc. 11-2, Hesford Aff. ¶ 14, PAGEID# 85; Doc. 11-7, Powell Dep. 88, PAGEID# 1647). The shop work is not within the exclusive jurisdiction of any collective bargaining agreement. Several individuals performing shop work for Sofco included members of the Laborers' union and several non-union individuals, including Local 18 members. (Id. ¶ 14, PAGEID# 85). Sofco understood this work to be outside the Local 18 CBA, but because someindividuals happened to be Local 18 members, Sofco voluntarily paid contributions to the Fund so those individuals could have benefits. (Id.).
Sofco utilizes many different methods and equipment to erect steel and precast including cranes, forklifts, roustabouts, duct hoists, chain falls, jacks, etc. (Id. ¶ 12, PAGEID# 84). Sofco prefers to assign the forklift work to Ironworkers for the purpose of efficiency, and its past practice has nearly always been to do so. (Id. ¶¶ 12, 17, PAGEID# 84-85, 86). In some instances, Sofco assigned forklift work to Local 18 members. (Id. ¶ 12, PAGEID# 84). One example of a situation where Sofco would assign a Local 18 member to operate a forklift would be where Sofco employed a Local 18 crane operator, but there was a gap between projects for the crane and Sofco wanted to keep the crane operator on its payroll. (Id. ¶ 12, PAGEID# 85). Sofco also occasionally assigned forklift work to Local 18 members when it did not have enough Ironworkers to do the work or to settle a grievance with Local 18. (Id.).2
Local 18 never sought a binding determination that forklift work belonged to it. (Doc. 11-3, Byers Dep. 80-91, PAGEID# 187-190; Doc. 11-7, Powell Dep. 100-101, PAGEID# 1650). Indeed, Local 18 settled the few grievances it filed against Sofco by agreeing that Sofco would assign some miniscule amount of forklift work to Local 18. (Id.).3 Ultimately, though, Sofco insisted that its continuous practice of assigning forklift work to Ironworkers was correct, andLocal 18 abandoned its claim to the work and did not pursue the grievance. (Doc. 11-2, Hesford Aff. ¶ 15, PAGEID# 85; Doc. 11-3, Byers Dep. 89-90, Ex. U, PAGEID# # 189-190).
Sofco terminated its collective bargaining agreement and relationship with Local 18 effective April 30, 2017. . Since then, Sofco represents that all of their on-site construction work has been performed by the following: (1) Sofco employees covered by its collective bargaining agreements with Ironworkers Local Nos. 44, 172, and 290; (b) crane operators covered by the Local 18's CBA and its successors and employed by crane leasing companies that have contracted with Sofco to provide cranes and crane operators for these projects; and (c) licensed surveyors to establish building lines mainly for precast installations. (Doc. 11-2, Hesford Aff. ¶ 16, PAGEID# 85-86). Sofco represents that it did not perform any work within Local 18's jurisdiction after it terminated its CBA with Local 18.
In a letter dated August 31, 2017, the Fund alleged that Sofco's termination of its relationship with Local 18 resulted in liability for complete withdrawal, and it assessed complete withdrawal liability for the Plan year ending July 31, 2017, in the amount of $368,315 ($605,591 less credit for partial withdrawal assessments). (See Doc. 11-2, August 31, 2017 Withdrawal Liability Assessment, PAGEID# 121). In the same letter, the Fund also alleged...
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